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KARACHI: Exporters held back proceeds while goods’ transporters went on strike for 10 days, said banking sources on Thursday.

The exporters have demanded for a long time that the rupee should be devalued so they can earn more in terms of the local currency.

However, the government has kept the exchange rate unchanged for more than a year.

“The exporters always like to hold back export proceeds in the hope of getting a better exchange rate,” said Atif Ahmed, a currency dealer in the interbank market. He said export proceeds during the 10-day strike fell sharply.

He said the government remained unconvinced that the local currency’s depreciation could boost exports despite a continuous fall in exports. Instead, the government announced a number of incentives for the export sector, including the establishment of a fund of Rs100 billion.

In spite of pressure, the State Bank of Pakistan (SBP) kept the exchange rate at Rs104.85 in the interbank market and did not let it cross the redline set more than a year ago.

However, the open market rate witnessed sharp variations during the year and settled around Rs106.

“The market is stable, but the impact of the strike can be devastating. Exports have been declining with a significant fall in foreign exchange reserves,” said Malik Bostan, president of the Forex Association of Pakistan.

He said the strike will hit the exchange rate regime while the situation in the external sector is unsatisfactory.

Currency experts said the huge trade deficit and low remittances have been sending a red signal to the currency market as the government refuses to take the trend seriously.

“How long will the SBP be able to keep the exchange rate unchanged in the interbank market while the net dollar inflows decline amid rising trade deficit and debt servicing?” said Mr Ahmed.

He said the artificially maintained exchange rate in the interbank market can see a big change if it is not allowed to move in accordance with demand and supply.

On DawnNews

Comments (5) Closed

vikas

May 19, 2017 01:47pm

Wow. Someday this had to happen. But do these exporters realise that why the PKR has been artificially kept appreciated? The resultant inflation and debt servicing and repayment pressures will be so enormous Pakistan may slide into a Venezuela like situation. Critical balance. The exporters will have to wait long. A long time I think.

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baba

May 19, 2017 04:05pm

Devaluitin means more hike in consumers items and destability amongst the masses especially the lower and Lower middle class.

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Alba

May 19, 2017 07:52pm

The government is more worried about credit and paying back international loans than it is about how much money exporters are making.

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ANUJ Agrawal

May 20, 2017 01:43am

This is weird... So in Pakistan, exporters can go on a strike so that they can make more money by devaluation and at the cost of common man. To me it seems pre-mediated fraud by holding down the foreign currency until rates are increased. And has someone explained them that if the Pakistani currency is allowed to devaluate then your debts would become unbearable and would lead to Venezuela like situation.

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Riaz M M

May 20, 2017 03:02am

Exporters demand is total nonsense .If the exports from a country depended on low value of its currency then the exports from USA ,Germany,Japan,India would have suffered(pk Rs is already less than 2/3in value of Indian Rs ),in fact the opposite is true.Our exporters and Capitalists should improve their Products ,adopt innovation,Deliver what they promise to supply and reduce their profit margins to compete.At the moment the vast majority of them are not doing any of these.